Q&A: YOUR VAT QUESTIONS ANSWERED

Now that the VAT deferral period has ended, What do I need to do?

The VAT payment deferral period ended on 30 June 2020. This means you’ll need to set-up cancelled direct debits in enough time for HMRC to take payment and submit VAT returns as normal from 1st July 2020.

Is there a form for the direct debit?

Use the VATC9 or Making Tax Digital VATC9 forms to tell your bank or building society to set up a Direct Debit to pay your VAT.

How do I pay my deferred VAT?

Payment of the deferred VAT must be made on or before 31 March 2021.

Businesses may make ad hoc payments after the deferral period ends (after 30 June 2020) to repay any deferred VAT up to 31 March 2021, or make a one-off payment of the whole sum by the deadline.

Deferred VAT will not be automatically collected by HMRC via the direct debit that collects payment for VAT returns; taxpayers must make their own arrangements for the payment(s) to be made.

Please note that any payments made to your VAT account will be allocated against any VAT debts that were on file prior to the deferral period.

Does the VAT deferral period impact bad debt relief?

If you have deferred your VAT return payment due to the COVID-19 easement, you cannot claim bad debt relief for unpaid invoices where the corresponding output VAT is still unpaid to HMRC. It can be claimed once the deferred VAT has been repaid to HMRC.

I have to buy personal protective equipment (PPE) to start trading again. do I pay VAT on PPE?

HMRC have introduced a temporary zero-rate to PPE for supplies made in the period from 1 May to 31 July 2020.

Do I have to account for VAT if I receive a government COVID-19 grant?

The COVID-19 grants including the Small Business Grant, and the Retail, Hospitality and Leisure Grant as well a grant via the Self-Employment Income Support Scheme are all outside the scope of VAT so no output VAT is due on this income.

The receipt of grant funding does not automatically mean an exemption on input tax. You should look at each grant-funded activity separately and consider whether the activity is business or not. Where grants are received to support business activities, the normal input VAT rules apply.

Will the domestic reverse charge for supplies of building works or construction go ahead on 1 October?

HMRC have announced that there will be a five month deferment to the implementation date, so the revised commencement date is 1 March 2021.

Which VAT return payments cannot be deferred?

VAT return payments with a due date outside of the deferral period date range must be paid on time as normal, including:

• Payment for monthly and quarterly returns ending 31 May must be paid by 7 July

• Payment for monthly and quarterly returns ending 30 June must be paid by 7 August

• Payments on account where the interim payment or balancing payment is due from 1 July 2020 onwards

What do I do if I want to defer my VAT but it has been paid in error?

A refund can be claimed if a direct debit was not cancelled in time.

The quickest way for taxpayers to claim a refund is to submit a Direct Debit Indemnity Claim (DDIC) to their bank. When doing so they must ensure they state they want to claim a refund under the Direct Debit Indemnity Scheme.

There is no time limit in making this request. If a taxpayer wants a repayment from HMRC rather than contacting the bank, they must ensure that their bank details are updated using the online services.

Due to COVID-19 restrictions, payable orders are not being issued. It may take 21 days for the refund to be received if the DDIC process is not used.

Will any interest or penalties apply to the delayed payment?

No. However, VAT returns must still be submitted on time.

My business needs more help than this, what other help is available?

HMRC’s Time to Pay system has been enhanced to fit the specific impacts of COVID-19 and is available to all businesses and individuals who are in temporary financial distress as a result of the coronavirus measures and who are unable to pay their tax on time or have existing liabilities.

Additionally, HMRC has a dedicated helpline for those who cannot pay because of COVID-19: 0800 024 1222.

How will repayments work, will you offset repayments against VAT due? Can you make repayments faster?

Repayments will be paid as normal. This means that HMRC will offset repayments against any existing debt but not against any VAT deferred through this announcement.

Most repayments are paid within five working days.

If I am now in or going to be in a repayment position, can I move to monthly returns to improve future cash-flow?

Businesses, or their agents, can apply online to request to change to monthly VAT returns.

I have made Time To Pay (TTP) arrangements with HMRC before the 20 March, can I defer payment until 31 March 2021?

For TTP arrangements made for payments due before 20 March 2020, you will need to continue to make these payments. If you are struggling to meet these obligations, then you can contact the dedicated helpline on 0800 024 1222.

For TTP arrangements made for payments due between 20 March 2020 and 30 June 2020 only, you can benefit from the ability to defer payment until 31 March 2021. You do not need to notify HMRC. You will need to cancel any Direct Debits set up for these arrangements.

Does the VAT deferral period impact bad debt relief?

If you have deferred your VAT return payment due to the COVID-19 easement, you cannot claim bad debt relief for unpaid invoices where the corresponding output VAT is still unpaid to HMRC.

It can be claimed once the deferred VAT has been repaid.